2020 has been difficult, but your tax return doesn’t need to be. “There is always a range of myths that need busting around Tax Time and the changed circumstances this year have seen some new additions to the list,” Assistant Commissioner Karen Foat says.   

Check out this list of 2020’s top tax myths to avoid!  

1, Bank details need to be updated  

According to the ATO, last year many people in their rush to lodge early forgot to update bank details and delayed their refund. While the ATO receives information from banks, this doesn’t extend to updating details for the bank account you nominate to have your refund deposited into.  

2, You can’t “double dip”  

The ATO is concerned that some taxpayers may “double dip” by claiming their working from home expenses using the all-inclusive shortcut method while claiming for specific items such as laptops or desks. If you are claiming under the shortcut method, you cannot claim a separate additional deduction for any expenses you incur as a result of working from home.  

3, You can’t claim home to work travel  

According to the ATO, if you are working from home as a result of COVID-19, but sometimes need to travel to your regular office, you cannot claim the cost of travel from home to work as these are still private expenses. Although you are working from home, your home is still a private residence – it is not a ‘place of business’. Generally, you can only claim the cost of traveling from home to work if you are required by your employer to transport bulky tools or equipment and there is not a safe place to store these at your workplace.  

4, You can’t claim $300 if you had no expenses  

Ms. Foat stated that the ATO often sees people claiming a deduction although they did not purchase anything, and this is often because they thought everyone is entitled to claim $300. While people don’t need receipts for claims of expenses up to $300, they must have spent the money and can show the ATO how they worked out their claim.  

5, Work-related expenses must be work-related!  

The ATO finds taxpayers trying to claim personal expenses under the guise of work-related expenses, but the truth is, you can only claim for expenses that are directly related to earning your income.  

For example, if you are working in jobs that require physical contact or close proximity to customers and you had to buy your hand sanitizer, gloves, or masks to use at work, you can claim these items. On the other hand, if you are not in jobs that aren’t close to the public or if you have purchased these items for their general use, you cannot claim these items.  

Furthermore, you cannot claim for the costs of setting your children up for homeschooling, as the ATO views these costs aa being private expenses.  

6, Lodging early not necessarily means an early refund  

For this year, the COVID-19 element is likely to mean third-party information from employers, banks, private health insurers (and this year JobKeeper for employees and JobSeeker amounts) may not be fully available until later in July or mid-August. For most people, this information is ready by the end of July.   

Therefore, you should lodge when the ATO has automatically included this information for you. Lodging earlier can leave out some important information, which can slow your return down as a result. 

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Thanks to the ATO’s COVID-19 early release of super, those who have been financially affected maybe able to access some of their super early. However, since there is no restriction on how this money can be spent, eligible individuals can use this money for anything they choose or save it for future expenses. They can also recontribute some amounts back into their superannuation if they meet the contributions rules (both eligibility and acceptance) and, in the case of SMSFs, their trust deed allows it.  

This recontribution strategy involves withdrawing a lump sum and recontributing these funds into super as a non-concessional or concessional contribution, in which the individual can claim a tax deduction for the contributed amount. Although recontribution strategies are acceptable, it is important to understand that the new early release scheme is aimed to help those who are affected by COVID-19, not to help individuals obtain tax benefits. The ATO is now concerned that these actions have become prevalent and has issued a warning: “COVID-19 Early release of super – integrity and compliance”.  

The ATO highlighted the following aspects of the tax law related to superannuation that can happen if individuals use the mentioned recontribution strategy: 

• Excess contributions tax; individuals may need to pay additional tax if they exceed the concessional or non-concessional contributions cap 
• Contributions tax; concessional contributions made to a super fund are taxed at the 15% rate by the fund 
• affecting eligibility for a super co-contribution 
• Division 293 tax; individuals may need to pay additional tax due to income and personal super contributions. 

Furthermore, if individuals enter the COVID-19 early super scheme mainly for the purpose of obtaining a tax benefit, the application of Part IVA can happen. The ATO says schemes under COVID-19 early release of super that attract its attention include: 

• artificially arranging affairs to meet the eligibility criteria 
• withdrawing and recontributing super to claim a tax deduction 
• contributing an amount of super to claim a deduction and then withdrawing that amount. 

Where Part IVA applies to a scheme, the tax benefit obtained may be cancelled. Administrative penalties and interest charges can also apply. 

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More and more individuals are willing to report phoenix, tax evasion or black economy activity. The Australian Taxation Office revealed a record-breaking 15,000 tip-offs to its Tax Integrity Centre in the first quarter of this financial year – that equates to about 230 tip-offs per day.  

According to Peter Holt, ATO assistant commissioner, the main categories of tip-offs received were related to not declaring income, demanding cash from customers and paying workers “cash in hand”, not reporting sales and having a lifestyle that does not match income.  

The community is aware of black economy activities and are willing to make a tip-off. People are getting irritated at people cheating the system to gain an unfair advantage, and they genuinely want to stop cheats. The black economy means the community is mi

ssing out on important public services such as schools, healthcare, and other infrastructure. Honest businesses are also disadvantaged, and the employees getting paid cash in hand are probably not getting full entitlements.  

What happens after a tip-off?

• The ATO crosschecks the information and assesses what action needs to be taken.  
• Privacy laws prevent the ATO from informing you of the outcome or progress of your complaint.  
• Investigation can run from a few days to years.  

How do I submit a tip-off?

You can submit a tip-off by phoning the ATO’s black economy hotline on 1800 060 062 or completing a form on the ATO website or via the ATO app (“Contact Us” section). Make sure to include as much detail as possible. For more information, visit the ATO website.